SAN FRANCISCO — California completed a restructuring of its commercial paper program Wednesday that resulted in a downgrade to one subseries of notes.

Fitch Ratings downgraded the subseries to F-1 from F-1-plus, which represented about 12% of the $1.65 billion CP program.

The state reorganized its letter-of-credit providers for the program by making the banks and providers responsible for specific series, rather than the previous method of having multiple LOC providers responsible for the entire CP program.

California also increased the size of its commercial paper program to $1.65 billion from $1.56 billion, according to the state treasurer’s office.

Tom Dresslar, a spokesman for the Treasurer Bill Lockyer, said the move is an effort to strengthen the program. 

As a result of the changes, Fitch Ratings downgraded $200 million of California’s LOC-backed commercial paper to F-1 from F-1 plus because of the ratings on the banks now backing the notes. The balance of the CP program retains its F-1-plus rating.

The Fitch downgrade affects $150 million of paper backed by a letter of credit from Morgan Stanley and $50 million backed by an LOC from Bank of America NA.

Fitch assigns A ratings to Morgan Stanley and Bank of America, with an F-1 short-term rating.

Wells Fargo Bank, the California State Teachers’ Retirement System, the California Public Employees’ Retirement System, Royal Bank of Canada, JPMorgan Chase Bank NA and U.S. Bank NA are also providing LOCs for the notes, and their series carry F-1-plus ratings.

California restructured its commercial paper into six tax-exempt and six taxable subseries.

Moody’s Investors Service assigned its P-1 rating to the entire commercial paper program. It said the LOCs are big enough to cover the principal on the notes, plus 90 days of interest at a maximum rate of 11%.

Standard & Poor’s had yet to release its report on the restructuring by press time Wednesday.

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